SeanReadsTheNews

NYT: Apple's Supply Chain is Evil

This blogger doesn't really have time to do justice to the most important business story of the week - but it's Charles Duhigg and David Barboza's New York Times expose of workplace conditions at factories making popular Apple gadgets in China that published on January 25.

Employees work excessive overtime, in some cases seven days a week, and live in crowded dorms. Some say they stand so long that their legs swell until they can hardly walk. Under-age workers have helped build Apple’s products, and the company’s suppliers have improperly disposed of hazardous waste and falsified records, according to company reports and advocacy groups that, within China, are often considered reliable, independent monitors.

One almost wonders if all of the former Apple employees who were quoted anonymously due to confidentiality agreements waited until Steve Jobs had died to spill the beans on all of the detail the reporters were able to uncover.  

Those quotes, which demonstrate unequivocally that the famously progressive, liberal-loved corporation's leaders knew about working conditions Americans would consider inhumane at their suppliers and at best did nothing and in general did what they could to make it worse.

This is one of the nicer ones.

“You can set all the rules you want, but they’re meaningless if you don’t give suppliers enough profit to treat workers well,” said one former Apple executive with firsthand knowledge of the supplier responsibility group. “If you squeeze margins, you’re forcing them to cut safety.”

You need to read the whole thing - and it prints at 14 pages off the Times' website - to truly understand the impact but the reporters diligently undermine what would be the standard rejoinders to a story like this that alleges harm at a third party.

"We didn't know," shot down by those insider quotes, "we tried to fix the situation once we knew," ditto, "everybody does it," the reporters came up with examples of other companies boosting their suppliers margins to offset safety costs, and so on.

This blog is not so naive as to expect developing countries to adopt Western codes of conduct when they are still trying to grow.  That's not how the West developed and things will always be a little rougher until there is more wealth around.  However, this story came out the same week that Apple reported a cash hoard of almost $100 billion sitting on its books.  Without raising prices, cutting a dividend or affecting its own compensation at all, Apple has the resources to fix this problem.  Jobs and his successors just didn't want to.

This blogger also often takes issue with reflexively anti-enterprise coverage in The New York Times.  That's why it is even more important to take note when they publish an article where they set out to take down a corporate icon, and nail the company over and over again with well-source facts and not just thinly disguished opinions bridging from their own prejudice.

The Times' story is business journalism practiced at its highest level. It should win the Pulitzer this year.

 

Forbes: Village Voice Gets a Bad Rap For Abetting Prostitution

Dan Fisher, veteran legal eagle at Forbes Magazine today takes up the case of down-trodden alternative-weekly The Villiage Voice, which like Craig's List before it stands accused of abetting child prostitution and slavery thanks to its "Backpage.com" racy classified section. 

HIs article was spurred by a hit-piece in The New York Times by Nick Kristof which can be found here.

Dan's piece gets at the heart of The Voice's defense:

Since posters also supply credit-card numbers, it isn’t hard in most cases for police to track down who places those ads. (The advertiser in the Kristof case wrote a plain-vanilla personal ad for “labor day weekend fun” with a 21-year-0ld, but his credit card number allowed him to be quickly identified, Backpage says.)  The Backpage executive said the company responds to about 100 subpoenas a month, and dispatched an employee to testify before a grand jury called by the Brooklyn prosecutor Hersh as recently as September.

It's a tricky journalistic effort to defend companies accuses of crimes like that and Fisher, who is an attorney as well as a reporter, does a great job of making the argument that Kristof's article doesn't hold water.  He argues that there is no way to stop this activity altogether and by shutting down places that play fair with enforcement bodies, it only shifts the activity to even less savory places.

The Voice is engaged in a dirty business and its fair game for journalists to point that out but when accusations are this serious, they really should have the goods before calling for government action.

 

Reuters on the Rise of Zombie Mortgages

Most of the "victims" mentioned in stories about foreclosure during the housing crisis aren't victims at all, just people who didn't pay their mortgages trying to take advantage of paperwork errors by the bank to stay in their homes without making payments.

With several clients in the real estate business, I've read hundreds of these stories and can count the number that included someone who was foreclosed on despite being current on his or her payments on one hand clenched into a fist.

Today, Michelle Conlin, the former workplace-beat stalwart at BusinessWeek, writes on "zombie mortgages," and to her credit, she finds actual victims who have been wronged by the system.

So was Shantell Curtis of Utah. She showed up at her accountant's office last year only to learn that she had been sued for foreclosure on a house she had sold years before. Bank of America reported the delinquency to credit bureaus, tarring Curtis's credit. It turned out the entire saga stemmed from a bank coding error. The amount the bank falsely alleged Curtis still owed on her mortgage? One dollar.

Vietnam vet Dwight Gaines fell behind on his payments on his Birmingham, Alabama, home. Gaines paid off his entire mortgage, plus all the fees and expenses he owed the bank in March 2010, as a part of a Chapter 13 bankruptcy plan. But Bank of America kept sending Gaines notices that he still owed $6,842.37. Nearly two years later, Gaines is still fighting the bank in court.

In fact, she finds so many verified cases of people who had paid off a mortgage in full - let alone remained current - who were being tagged by the banks, she devoted almost half the article to that problem alone.

This should be the minimum standard for reporting on foreclosures, and yet this story stands out for being well-researched and sourced.  This type of advocacy journalism is important to fix the system - and to point out that not all people fighting the banks are created equal.

NYT: Baby, My Car Can Drive Itself

John Markoff, veteran technology reporter at The New York Times, has a fascinating story in the paper today about self-driving cars, which have been proven workable in road tests but could get held back from the market by a host of what would seem to be lesser issues.

What happens if a police officer wants to pull one of these vehicles over? When it stops at a four-way intersection, would it be too polite to take its turn ahead of aggressive human drivers (or equally polite robots)? What sort of insurance would it need?

By stepping away from his core area, how technology works and its market opportunity, Markoff's stretch into reporting on law and regulation makes a fascinating statement about what it takes to bring a truly novel product to market in today's America.  When cars first hit the road, there were no rules - those came later.  Driverless cars may find themselves matching the 12 tasks of Hercules to prove themselves safe.

Markoff does a good job of balancing sources who speak for regualtors who just don't like the idea of 2-ton cars rolling down the road without drivers and technology-driven leaders at Google who believe that programming is everything.

It makes for a fascinating read and a look into the not-too-distant future, a great form of business jouranlism we could stand to see more often.

Forbes Explains Why Best Buy Is Going Bankrupt Gradually

My New Year's Resolution is to try and figure out a way to make a blog about great business journalism happen in a timely enough fashion to be valuable while also dealing with my professional schedule.

As a start, I'm highlighting an article from Forbes.com by Larry Downes, who is a management consultant not a reporter, on why Best Buy is blowing it.  His deconstruction of Best Buy's incredibly lame attempt to weasel out of taking responsibility for taking orders it couldn't deliver during Christmas season is a PR 301 course.

The company issued a statement that read:  “Due to overwhelming demand of hot product offerings on BestBuy.com during the November and December time period, we have encountered a situation that has affected redemption of some of our customers’ online orders.”

Let’s parse that sentence for a moment.  The company “encountered a situation”—that is, it was a passive victim of an external problem it couldn’t control, in this case, customers daring to order products it acknowledges were “hot” buys.  This happened, inconveniently for Best Buy, during “the November and December period,” that is, the only months that matter to a retailer. For obvious reasons, the statement ties itself in knots trying to avoid mentioning that the “situation” occurred during the holidays.

Amen.  Downes goes on to re-write the statement in a way that accurately describes what happens.  Best Buy's PR people, working too hard to craft a statement that avoids taking responsibility for anything, has brought down more negative press (and my first blog in more than a month).  

A straightforward statement and some kind of offered compensation would have at least started to put the situation behind them.

Wired on Netflix Split

Mother of mercy it's been a tough several weeks for blogging, which is why the first post in so long is a follow-up to my earlier fascination with Netflix and its business model, today featuring Tim Carmody of Wired's Epicenter blog.

The article attempts to make sense of the latest move by Netflix, which for the briefest moment was poised to seize the mantel of the "New Apple" that would force change on the hidebound entertainment industry but now seems to be just trying to stay alive.

The best part is the end, in which Carmody observes that if Netflix and Qwikster were separate businesses, the clamor would be for them to merge.

The fact is that if Netflix and Qwikster were already separate companies, each just as successful at their respective businesses as Netflix’s streaming and DVD businesses are now, they’d probably be talking about a merger today. We’d already call Qwikster “the Netflix of discs-by-mail,” or Netflix “the Qwikster of streaming video.”

After the merger, the two companies would complement each other’s offerings, synergize their brands, make subscription and queue management easier for subscribers, and use the extra resources to negotiate better deals for content. It would be all about bringing Netflix’s simplicity to Qwikster, or vice versa. All of the Wall Street/Silicon Valley logic would be pointing in the opposite direction. 

Most of the rest of the post was a fairly conventional unpacking of the situation and why Reed Hastings was backed into this particular corner and how painful it would be to get out of.  That last piece of meta-analysis of how the media and business leaders are contrarian by nature and nothing will ever make them happy.

Wired: Mercenaries Top Governments in Piracy Defense

Wired has another article on the economics of piracy today, a theme I can't resist.  Today's piece by David Axe is on the economics of protecting shipping and notes that mercenaries are more effective - and a lot cheaper - than the U.S. Navy.

The days are probably numbered for 10,000-ton Burke-class destroyers chasing down illiterate Somali thugs sailing in souped-up fishing boats called “skiffs.” The future of the piracy war could belong to Dave and guys like him, standing lonely guard on gigantic, fortified commercial vessels speeding through pirate-infested waters.

Destroyers are expensive and ill-suited to long, tedious piracy patrols. Armed guards are comparatively cheap and, as Dave proved that April morning, highly effective. Sure, guards come with their own limitations and complications. But hiring professional ship-protectors beats the alternative: an endless, pointless military exercise.

The Wired story is lensed around a successful piracy defense on an oil tanker sporting a squad of ex-Royal Marines but includes detailed business and economic analysis.

There is even a section on how reputation risk from hiring Xe (nee Blackwater) slowed the growth of armed ship defense until recently.  I blogged Fortune's coverage of Blackwater's rebranding as an extreme version of reputation management last year, marvelling that the playbook for recovering from employees implicated in a multiple homicide where the same as a customer service problem or accident.

What Wired showed today is that it wasn't enough - and that the reputation damage went beyond Blackwater to infect the whole industry.  We'll never know how many had to endure being Somali hostages as a result.

FT's Kellaway on Googlespeak in Motorola Announcement

Making fun of badly written press announcements and empty CEO-blather shouldn't really be a specialty - all journalists should contribute - but Lucy Kellaway of the Financial Times seems to have grabbed it anyway, delighting back on August 19 with a column on Google's announcement that it had bought Motorola.

“Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers.”

These 32 words were last week repeated uncritically in newspapers all over the world, but no one seems to have stopped to wonder: what on earth was he on about?

Lucy then goes on to deconstruct every noun and verb in the sentence to explain what each cliched term was intended to communicate - and implicitly how far from the truth it landed.  You need to read the whole thing to get it, very worth it.

My answer is that journalists have broadly given up on expecting CEOs to make sense.  In part, this response is expected based on the risk executives incurr from communicating clearly.  After one too many announcements like that from a company like Google that you can't just ignore, they've started to just use the canned quotes and then try to get the truth into the article elsewhere.

The great stories either get the executives on the record saying something coherent, or just make fun of the whole process.  And to Google's credit, at least they put what they hoped to accomplish with the deal ahead of the vacuous quote about how happy they are to have done it.  

Aside from Barak Obama signing the debt ceiling increase, when was the last time an executive made an announcement and then went on to say how unhappy he was that he was forced into it?

CNNMoney - Death of the Text Message

I for one, was glad to read David Goldman's CNNMoney report that the text message is dead.  That means I won't have to start using them.  Snarky joke aside, Goldman makes it clear that phone companies delight in the immensely profitable but low-bandwidth messaging technology and will miss it when its gone.

Texting may sound cheap, but it's actually an incredibly expensive way for consumers to send data. Text messages max out at just 160 bytes, which means 20-cents-per-message plans cost wireless customers an astounding $1,250 per megabyte.

Unlimited plans are also a rip off. If a wireless customer sent one text message every minute of every day of every month (44,640 texts per month), at "just" $20 per month, that still works out to $2.80 per megabyte.

Sadly, the reason text message are being delivered into the cold, cold ground is just that app developers have figured out a way to make them free - so they aren't really going away as a means of communication, just as a means of extracting ridiculously high fees from cell phone users.

Goldman once again does the math around consumer data delivery much as he does breaking down cell phone contracts and cable television packages, providing consumer-friendly information that also speaks to larger business trends.

Mixed Blessing: NYT - Local Newscasts are Growing

I did a double-take at yesterday's New York Times headline "Local TV Newscasts Are Expanding," by the redoubtable Brian Stelter, it is hard to think of anything more irrelevant to the news environment that court-side step reporting and beach-side reports from hurricane zones.

Stelter's article shows that local news still drives advertising dollars and he makes a case, however strained, that they may have learned something from recent lean years and gotten better at reporting news.

Many [Gannett] employees have been trained to be what Gannett calls multimedia journalists, also known as one-man bands, able to record, produce and report pieces from start to finish.

“We have more people gathering content than we did a year ago, because more people are trained on more platforms,” Ms. Beall said.

Such arrangements have been a source of grumbling for TV journalists for years, but for those who have never experienced the old way — a reporter, a videographer and sometimes a producer and a sound technician — the new way is more acceptable, and sometimes even preferable.

Of course, the article also notes that these segments are bolstered by social media and commentary segments - "man in the street" blather that creates identification with the audience but doesn't had to the news value of the segment, and quotes a producer who just added a fifth person to the weather team and invested in dashboard cameras - because reporting weather as news is still the highest form regional TV journalism.